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A Break With Style, Not With Strategy

SAN FRANCISCO, March 29 - Hewlett-Packard once went for flamboyance and style with Carleton S. Fiorina, the chairwoman and chief executive who was fired in February.

On Tuesday, the company chose to return to its traditional low-key management approach in naming Mark V. Hurd, the little-known president and chief executive of NCR, a maker of computers and automated teller machines, to succeed Ms. Fiorina.

The appointment of Mr. Hurd, who led a turnaround at NCR through operational improvements and cost-cutting, underscores the Hewlett-Packard board's commitment to a growth strategy led by an expansion into consumer electronics.

Wall Street was enthusiastic about the choice of Mr. Hurd, 48, as a steadying influence to lead Hewlett-Packard, which experienced disappointing profits in the last four years. Its shares rose $1.99, or 10 percent, to close at $21.78 on Tuesday, though a formal announcement of the appointment was not made until after the markets closed.

The chairwoman of Hewlett-Packard, Patricia C. Dunn, said that the appointment of Mr. Hurd was a strong statement that the company did not intend to unravel its merger with Compaq or sell off other major pieces of its business.

Rather, Mr. Hurd is seen as an executive who can bring discipline and order to the diverse portfolio of businesses that includes personal computers, corporate servers, printers, cameras, software and corporate services. In dismissing Ms. Fiorina, the board said it was not interested in changing its strategy of offering a full range of digital products to consumers and businesses. Ms. Fiorina, who was considered a high-profile marketing wizard, was unable to increase the company's profitability despite its $19 billion acquisition of Compaq in 2002.

"H.P.'s directors chose wisely," said C. K. Prahalad, who is a member of the NCR board and a professor at the University of Michigan business school. Mr. Hurd, who spent 25 years at NCR, has deep knowledge in the details of running a business and is a good motivator of people, Mr. Prahalad said.

The challenges Mr. Hurd now faces are substantial. Hewlett-Packard, based in Palo Alto, Calif., is in fierce competition with I.B.M. in the market for corporate information technology services. It is also in a bruising fight with Dell Computer in the PC market and increasingly in the printing business, one that Hewlett-Packard has long dominated.

"There is a lot of strategic challenge here, and there are lots of moving parts," said George Colony, president of Forrester Research, a computer industry consulting and market research firm based in Cambridge, Mass.

Ms. Dunn said the board believed that the company had the right mix of businesses and had chosen Mr. Hurd precisely because it believed he was the best candidate to carry out the company's strategy.

"We were looking for someone who could run these businesses," she said. "Our strategy is to execute, and Mark is very strong and execution-oriented."

Ms. Dunn, who led a three-member screening committee with the directors Jay Keyworth and Thomas Perkins, said the selection process had taken seven weeks.

The company initially considered a large number of candidates with the assistance of Russell Reynolds, a New York-based executive recruiting company, she said. After that initial selection, the board committee then talked to dozens of potential candidates. The entire board interviewed a recommended "set of finalists," she said.

The choice of Mr. Hurd is considered by many as a way to ease the internal crisis that preceded Ms. Fiorina's ouster.

Ms. Fiorina arrived at Hewlett-Packard in 1999 and was the architect of the merger with Compaq. She presided over cost-cutting and a structural overhaul, and pushed revenue to $80 billion in 2004 from $47.2 billion in 1998, but was never able to generate the kind of profit needed to please Wall Street investors.

Under Ms. Fiorina, Hewlett-Packard shares peaked in August 2000 at $55.98 before declining to $21.39 at the time of her departure last month.

Late last year, as it became increasingly obvious that the Compaq merger would not generate significant financial growth, the board pressed her to give up some control and to bring in a chief operating officer. When Ms. Fiorina resisted the challenges to her authority, it precipitated a confrontation and she was forced to step down.

A number of analysts said that despite the challenges facing the company, the competitive situation was not impossible if the company was well run.

"There is tremendous upside for somebody able to come in and focus on operations," said T. Michael Nevens, the former director of the McKinsey & Company practice in Silicon Valley. "What they need is someone who is able to make hard choices on businesses and people and where to invest."

Whether Mr. Hurd is able to turn around Hewlett-Packard, he will receive a handsome compensation package.

The details of his package, which were filed on Tuesday with the Securities and Exchange Commission, include a base salary of $1.4 million in addition to bonuses of up to $2.8 million for meeting performance goals.

Other incentives, including 700,000 stock options, raise the value of his compensation package to more than $12 million. He will also be compensated for income forfeited upon leaving NCR, with the amount between $15.4 million and $21.9 million.